CEE private equity, after a tough period that saw many funds go out of business, is enjoying a surge in activity, thanks to access to leveraged finance. Some funds are making big returns. Others, however, are still struggling.

Real money investors such as mutual funds, as well as credit hedge funds, prop traders and other specialist investors, are finally treating credit risk as an asset class to be managed like any other. They bring new liquidity to the markets in default swaps and credit indices that have made this possible.

New tools such as credit default swaps and index products have changed the ground rules of hedge fund activity in emerging markets. They are paying off now but will sophisticated pricing and technology be able to cope with the next emerging-market debt crisis?

Lack of volatility and narrow spreads have driven investors to seek out yield in the structured credit market. New products built on transparent, non-proprietary credit derivative indices have fed this demand but participants worry that not all investors have a clear idea of what they are getting into.

The mini bank crisis Russians faced in the summer has underscored the urgent need for bank sector reform and the creation of a system that can respond to the credit needs of businesses and individuals.

Banks in Arab countries enjoyed much better results in 2003, especially during the second half. In 2002 earnings fell on the back of weakness in global investment markets, tight margins, and higher provisions. Net profit bounced back in 2003, rising by over 15% for the top 100 Arab banks.

Germany breached the EU's budget deficit limit of 3% of GDP over the first six months of this year and will almost certainly break the terms of the European stability pact that underpins the euro for the third year in a row. In fact, the government managed to run a 4% budget deficit over the first half of this year, slightly higher than the 3.9% for the end of 2003, federal statistics office Destatis revealed last month.

South Africa has built stable macroeconomic foundations since the overthrow of apartheid but its potential as a regional leader is still hampered by corporate rigidities, untapped talent reflected in high unemployment, an Aids epidemic and a failure to attract inward investment.

Country risk index: The latest Euromoney country risk survey, which for the first time incorporates data on perceptions of corruption, reflects continuing upheaval in the Middle East and Africa that is only partly compensated for by a favourable global trade environment.

Argentina has over half a million creditors, while Iraq has comparatively few. But dealing with $100 billion of Iraq's debt has given everyone from the IMF to the Paris Club a tough problem to resolve. The US government will urge generosity but a happy solution for all interested parties is next to impossible.

If your competitors are beating you to the most lucrative deals, it could be they're better at pressing the flesh. Wooing potential clients over drinks or dinner is as much a part of a banker's job as making formal pitches.

Through western eyes, China and India might seem locked in a struggle for economic supremacy. The truth is quite different. The economies are complementary more than being competitors with each other, and the implications will shape the global economy for decades to come.

Senior bankers who quit their jobs on the pretext of pursuing new interests often quickly emerge in a similar role. Not so Manfred Schepers, who left UBS last June after 17 years. He said he was leaving to consider new banking roles but that his first priority was a good break. He meant it.

By Camilla Palladino

In 20 months as governor, Alfonso Prat-Gay built a credible central bank from almost nothing, managed the money supply brilliantly, oversaw currency stability, kept rates low and even began whipping the banking sector into shape. For these achievements, he is Euromoney's central bank governor of the year. But he also strove for greater independence for the central bank. Now, on the eve of the country's crucial bond exchange, president Nestor Kirchner has chosen to dispense with Argentina's most internationally respected policymaker.

German savings banks are using credit default swaps to reduce their credit risk concentration for the first time.

MBNA Europe's delinked programme should help Europe's ABS issuers to respond to investor demand

Russia's economy is roaring up the growth curve but dependence on oil revenues, insufficient diversification into other activities and a growing gap between the well-off and the poor give cause for concern.

Investors ask tough questions these days about companies' ability to honour their commitments. After all, no-one wants to fall victim to the next corporate scandal. But Toys “R” Us shareholders and bondholders are safe, aren't they? Surely official “spokesanimal” Geoffrey the Giraffe and chums won't let them down.

There's an obvious appeal in linking your brand with the Olympic ethos of excellence and achievement, as the likes of John Hancock, Visa and Greece's own Alpha Bank did at last month's Athens Games. Other sponsorships are harder to work out. Standard Bank of South Africa, for example, is sponsoring a dead whale. Misty is, or was, a southern right whale (Eubalaena australis) that came off second best in a collision with a ship and washed up near Cape Town. As Standard Bank says in a grisly press release: ?Decomposition set in and her rotting 70-ton body became a source of controversy. It was decided to implode the carcass but [residents] persuaded the powers to allow them to remove the rotting flesh to preserve the skeleton.

No-one disputes that China's growth rate needed reining in. While investors worry over the possible consequences of a sharp slowdown, most economists believe that, contrary to global historical precedent, the Chinese authorities might have pulled off the trick of a relatively painless cool-down. But serious structural flaws in the economy remain and make China a perilous place to invest.

Does present poor hedge fund performance cast doubt on the broad validity of the sector or have new investors that flooded into hedge funds recently fallen for myths about their success and failed to see performance in a historical context? What is clear is that attempts to match capacity to demand have at least temporarily undermined some hedge fund strategies.

Having been heavily overweight on Russia last year, many emerging-market equity investors are now scaling back their positions. Some investors are making a fundamental reassessment of Russian equity risk.

Is that spare $400 million giving you a headache? Do you already have the private jet, the yacht, art collection, international properties and a charitable foundation? Maybe you now need your own team of dedicated advisers to help you oversee your family's wealth. How about a family office?

In the lull between the fundamentals of European companies improving and their expanding or acquiring rivals, there's been a dearth of new credit issuance. Hence the interest investors have taken in liability management deals. Investors claim to see good returns from these, but this is by no means guaranteed.

A slowdown in the growth of China's asset pool is not deterring new entrants among fund managers.

Analysts are growing increasingly concerned about rising problem loans advanced to SMEs by Korean banks. The banks' track record inspires little confidence. They lent unwisely to the conglomerates in the late 1990s and then hit problems with consumer credit cards. Have the Korean banks learnt their lesson or is a third bad debt crisis looming?

The EU's decision in December on Turkey's bid for membership will have dramatic effects on the country's economic development. But even if the formal accession process begins, major reforms will still have to be undertaken.

Following a period of sustained economic growth, the Caribbean is faced with a new challenge. Recent developments in international legislation might reduce capital inflows and put more pressure on the region's financial sector.

South African banks are working out how to structure and finance the Black Economic Empowerment (BEE) deals that are altering the ownership structure of the country's financial services industry. Under South Africa's voluntary Financial Sector Charter, direct black ownership in financial institutions should reach 10% by 2010.